With cyber-crimes looming large, effectively securing sensitive data has emerged a big challenge for government agencies and military establishments. As they embrace new technologies, newer threats keep pace. Though the IT infrastructure of government agencies face both external and internal security threats, of late, internal threats seem to be far more alarming as many of the reported security incidents have been caused by malicious insiders having authorized or unauthorized privileged access to the government IT resources. Analysis by IT experts has revealed that insider threat is growing at unprecedented rates. This paper analyzes how insider threats stem in government agencies, the ways to tackle the challenge and also brings out the importance of controlling access to Privileged Passwords.